COLOGNE, Germany - The Hungarian government has approved the plan proposed by Hollywood producer Andy Vajna to overhaul Hungary's bankrupt film funding system. Hungary's prime minister, Victor Orban has backed Vajna's plan, which calls for around $8.7 million (1.6 billion Hungarian Forints) in state funding for a new body, the Hungarian National Film Fund. Hungarian-born Vajna, whose Hollywood credits include Terminator, Basic Instinct and Rambo, now has to submit a three-year-plan for the new fund.

The Hungarian National Film Fund replaces the old Hungarian funding body, the Hungarian Motion Picture Foundation, or MMKA, which the government shut down last summer after the body racked up some $50 million in debt. Much of that is held by banks which advanced credit to local and international producers based on funding guarantees with the MMKA. Now that the MMKA is bust, the banks are calling in their debt. Some 49 production companies are effected. Speaking to The Hollywood Reporter in Cannes last month, Vajna said his new film fund will not be able to honor all debts to local and international producers, though he is in negotiation with at least four banks.

Looking to the future, Vajna said the new fund will do less than the old MMKA, focusing entirely on production financing. "The old system tried to do too much, even paying for film clubs and things like that…and it was badly managed," he said. "Our new plan is more transparent, more down-to-earth. In the future, the financing for Hungarian films will be based on talent, not connections."

Vajna said the new fund hopes to begin reading scripts by mid-June and that it plans to back "between three to four films this year and hopefully double that next year."

Hungary's popular 20 percent tax break for local shoots has not been effected by the changes. Vajna said the tax incentive has been essential in "keeping Hungarian talent employed on international projects during this funding crisis" but that he would like to make the tax break more transparent and easy-to-use. Hungary's tax break is one reason Marc Forster picked the country as a location for his upcoming zombie thriller World War Z starring Brad Pitt. World War Z begins its Hungarian shoot this October.

Vajna said he has no plans to go back to Hollywood just yet, saying he expects to be running of Hungary's film policy for the next two to three years.